Cable Show 2009: Networks Disagree About Online Impact

Streaming long-form video on the Web is still a marketing and promotional play for most cable networks, but other networks believe the practice will build bad habits among younger viewers and eventually take cable out of the original programming development game.

That was the conflicting sentiment among a panel of cable network programming executives speaking Wednesday during a Cable Show '09 panel dubbed "Programming For a New Video Paradigm."

While the panelists agreed that the Web is a useful tool in helping to promote both new and existing series, Rainbow Media Holdings CEO Josh Sapan said offering full episodes of quality series online creates bad habits among viewers who may not feel the need to pay for cable content if their favorite shows are available for free on the web.

"It is a practice that doesn't provide an economic reward and compromises the model that creates great TV," he said. "The industry generates around $25 billion in affiliate fees and somewhere around that in advertising fees. If we jeopardize that, it's a pretty high price to compete on a daily basis for share."

Scripps Networks president John Lansing also said that excessive streaming of cable programming content could hurt the dual affiliate fee/advertising revenue intake that networks enjoy today. He added that offering content online only provides potential advertising revenue without a second revenue stream to support the development of new and innovative content.

"I worry about an online video industry that aspires to an advertising-only model that would not support the programming it seeks to monetize," he said.

But NBC Universal president of Cable Entertainment and Cable Studio Bonnie Hammer said that the Web enhances consumers overall television experience and does not disrupt or compromise ratings and viewership on linear cable networks. She pointed to NBCs hit series The Office, which saw an increase in its television ratings after being streamed on the Web.

Ratings for FX series Always Sunny In Philadelphia also benefited from exposure on the Web, as well as startup networks that don't have significant distribution, according to Fox Networks Group president of National Cable Networks Rich Battista. He added sites like the Fox/NBC U-owned Hulu reach young viewers who don't necessarily watch a lot of television.

"We don't want to put our whole lineup on the Web, but as long as you're careful, its additive", noted Hammer, who added that young users often utilize the Web and television at the same time. "If you don't allow [consumers online access] they steal it, so you have to provide it legally."

But Turner Entertainment Networks president Steve Koonin said cable's bread is buttered through linear TV and maintaining positive relationships with cable operators supersedes any current benefits generated from online streaming.

"Cable affiliates have to come first," said Koonin, whose networks TNT and TBS stream series episodes four days after they air on the networks. "We have to be careful [online efforts] don't break the fragile ethos that exists today."

Lansing added that the "elephant in the room" is the danger to the subscription model, which "pays for original programming, the model that supports the ability to create unique brands." Putting that brand at risk by putting content online "is not a risk were willing to take."

When asked whether programmers should charge operators more for online content, again Lansing said, "If they charge the customer more, that's something we should share."

Van Toffler, president of MTV Networks music and logo group said that digital video recorders, which allow consumers to fast-forward through commercials, is a greater threat to a networks revenue base than online streaming.

But Koonin pointed to VOD an ideal way to offer consumers the opportunity to watch content at their leisure. He added that TBS's top comedy series Tyler Perry's House of Pane averages nearly 500,000 viewers a week during its VOD runs.

He also pointed to a Cox VOD test that allows the network to include ads and keeps consumers from fast-forwarding through the show.

Lansing said that programmers understand that they are interconnected with operators. As for an authentication process that could allow subscribers to access cable shows online, Lansing said programmers would be listening for the "value proposition" from cable operators.

"If we don't build a system for our own ecosystem, then someday we'll look back years from now and regret it just like the music industry", he said.